Malls have become a great destination for all age groups, from kids to senior citizens to go for shopping, hanging out, relaxing, etc. Various age groups have different reasons to visit a mall. Right from clothes to restaurants, a mall provides almost everything under one roof. But off late you may have also noticed, and be amazed to see a small counter at some corner of the mall trying to sell ‘Insurance policy’ to visitors of the mall. We are sure no one in their wildest dreams must have thought of buying an insurance policy from a mall, even though insurance is an important part of one’s financial planning portfolio.
 

Considering the change in the distribution pattern in selling insurance policies as cited above, the Insurance Regulatory and Development Authority (IRDA) has issued a discussion paper to examine the issues related to tying and bundling insurance policies with other services and goods and how conflicts of interest that arise need to be dealt with.

 

According to the IRDA the potential areas of conflict in tying or bundling of insurance products are:

 

• In some cases the distributor is tempted to push a particular product to a customer without considering whether the customer requires it or not. Such instances occur when a large group entity has long standing relationship of trust and blind faith with the distributor.
• Contractual relationship between an insurance company and distributor may bind the distributor (here, corporate agent) to maintain insurer bias and therefore a product bias as well. However, when the distributor in question is a broker, there is no compulsion to sell product of a particular insurer as the choice of the insurer rests with the broker (as he may products from different insurance companies),
• Insurers many a times resort to mass selling their products through certain channels of distribution thereby diluting the quality of disclosures and giving information or providing clarification.
• Bundling of the insurance product with the particular product or service which is primary business of the distribution channel, leaves the customer with no choice. For example, if a credit card company redeems the points accumulated by the credit card user only via an insurance product, then the credit card user will have no choice but to redeem them in return for an insurance policy which may or may not be required.

 

Impact of such an initiative on policyholders...

 

Policyholders may not be compelled to buy insurance against their will if IRDA manages to put restrictions on the tying and bundling of insurance products. Also, mis-selling will be reduced to a great extent thereby benefitting the policyholders. Moreover, the policyholders also stand to benefit from the disclosures that may be mandated on the insurers which otherwise got diluted due to mass selling of the insurance products.

Our view:

In our opinion products which are intangible in nature like insurance policy should be simple and easy to understand and should be not made complicated or bundled with other services or tangible products. We think that IRDA has taken a right step in un-complicating the insurance product by reviewing bundling and tying of insurance products. We believe that instead of selling insurance policies in the malls, the insurers should create awareness for insurance products at such places by undertaking educational programmes. Moreover distributors / brokers need to advice prospects appropriately taking into account their Human Life Value (HLV) and financial goals, thereby providing an optimal insurance cover. Distributors / brokers need to be more responsible, while advising prospects and engage them in a financial literacy, movement which in turn can lead to them getting a larger pie in the insurance business.

 

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Comments
vlnarayan2000@yahoo.co.in Feb 24, 2012 In India the insuring public prefer to insure their cars, pets, travel, machinery, homes, loans, consumer durables, even mobiles, That is the Indian community is more worried about their possessions. Unfortunately, Indian Government does not have any law to protect the humans and their dependent through a comprehensive frame work of law.  This has largely directed the Insurance companies to go for investment cum insurance, where the quantum of insurance is inadequate to support the family, inthe absence of the breadwinner. It is my considered view that all the income earners should be compulsorily made to seek insurance, to cover the needs of their dependents.
usyoo@joseilbo.com Jun 17, 2012 You replace the items whenever you want to keep receipts and boxes. But theft claims usually take a minimum of 4 6 weeks to settle. The police usually take 2 4 weeks, just getting the official copy of the theft report to the insurance company. You'll be asked for an inventory of what was stolen, but nothing happens until that police report is received by the insurance company, and there's nothing you can do to speed that up.

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